Members of North Central Farmers Elevator (NCFE) in Ipswich, S.D., and Wheat Growers in Aberdeen, S.D., have voted in favor of a merger of the two companies, according to a Sept. 28 announcement from both co-ops. The unified company will take effect on Feb. 1, 2018, under a new name that has yet to be determined.
“We listened to our members, and it was based on their comments that we brought this to a vote of the membership,” said Rick Osterday, NCFE board president. “We’re pleased that they concluded that the unification of both cooperatives can bring additional value to members and ensure the long-term relevance and viability of a unified cooperative. We want to thank them for their support and participation in this important part of cooperative governance.”
NCFE members voted 911-657 in favor of the merger, while Wheat Growers members supported the unification with a 1,598-954 vote. The voting period extended from Aug. 29 to Sept. 28. The focus of the two co-ops now turns to planning integration efforts, including developing a name for the new business.
“This is a merger of two financially strong, legacy-rich cooperatives,” said Hal Clemensen, Wheat Growers board president. “Our mission now is to seize this opportunity to build a new, even stronger cooperative better able to serve our member-owners. As we go forward, we will create new efficiencies, take advantage of new technologies, and continue to build a strong employee team – all in order to create more value for our members.”
NCFE and Wheat Growers first attempted a merger in 2015 (GM March 9, 2015), but the proposal went down to defeat when NCFE members rejected the unification with a 51 percent majority (GM June 22, 2015). Had that merger proceeded, the new co-op would have started operations in August 2015 under the CentraGro Cooperative name, with projected annual sales of $2.23 billion and approximately 7,000 members.
NCFE and Wheat Growers alerted members on July 31 that they were considering a second merger (GM Aug. 11, p. 1), claiming the decision was driven by a number of “market changes and pressures.” In an FAQ supplied to members on Aug. 14 (GM Aug. 18, p. 1), the companies elaborated on these pressures, citing lower commodity prices, a downturn in the agriculture economy, and a drought that is impacting the trade areas of both co-ops.
In preparation for their second merger vote, NCFE and Wheat Growers held 21 informational meetings from Aug. 21 to Sept. 1 in multiple South Dakota locations. Votes were tallied on Sept. 28 at a special meeting in Aberdeen at the Dakota Event Center.
The unified cooperative will be headquartered in Aberdeen, with the NCFE Ipswich headquarters remaining open as a regional office. Current Wheat Growers CEO Chris Pearson will serve as CEO of the new company, with current NCFE General Manager Mike Nicholas becoming the new executive vice president and COO of the company’s grain division.
Wheat Growers currently has more than 5,100 active member-owners and approximately 40 grain and agronomy locations in eastern North and South Dakota. NCFE offers grain, agronomy, feed, and energy products and services from 22 locations in north-central South Dakota and south-central North Dakota, and has more than 2,400 producer-members.
Wheat Growers and NCFE estimate that the merger will create synergies that save $12.7 million per year, or $50.8 million over four years. These annual savings include $4.6 million in agronomy, $3.7 million in grain, $2.9 million in operations, $800,000 in energy, and $700,000 in administration.
NCFE and Wheat Growers stressed that no jobs will be eliminated as a result of the merger, but said it is “too early to predict” if expected synergies will result in facility closures. “Questions about facilities and operations will be worked out by the new combined boards during the year following the merger,” the FAQ said. “Where there is any overlap in services or facilities, the boards will take a careful look at what is best for our members.”